Tags: Ritter | retirees | shy | stocks

T Rowe's Ritter: Retirees Shouldn't Shy Away From Stocks

By    |   Monday, 06 July 2015 07:00 AM

The old conventional wisdom that retirees should foreswear stocks for bonds is wisdom no more, says Stuart Ritter, senior financial planner for T. Rowe Price.

"Too many retirees are working from an outdated playbook, one that de-emphasizes the crucial role of equities," he writes in the AAII Journal. "The disconnect between modern retirement lifestyles and an old-fashioned approach to investing underscores a big risk that can threaten retirement bliss: the chance that a retiree might outlive his or her assets."

Given longer life expectancies and the ultra-low interest-rate environment of the past seven years, you can't expect interest payments from your fixed-income investments to provide for your retirement needs, Ritter points out.

Many in the financial community argue that curbing risk is "simply a matter of reducing equity exposure in favor of fixed-income holdings and short-term investments like cash," he says.

But, "by reducing equity exposure too much in retirement, investors are simply trading a potential reduction in short-term volatility for other risks, such as ... outliving their assets."

Many experts agree with Ritter, recommending equity-income investments, such as dividend stocks, preferred stocks, real estate investment trusts and master limited partnerships.

Elsewhere on the retirement front, for those of us who aren't in love with our job, early retirement sounds like an attractive option, but how can we get from here to there?

Eric McWhinnie of The Cheat Sheet news service offers a few suggestions in USA Today.
  • Financial education. "Too many people would rather go to work, come home and relax, take a vacation every now and then, and worry about retirement later," he says. There's plenty of information available on the Internet for those willing to take the time.
  • Savings. "Early retirees stay on track by consistently spending less than they earn and investing the difference," McWhinnie explains. Many tax-saving options are available through IRA and 401k plans.
  • Some of it is attitude, he says. "Retirement should not be seen as a race to accumulate enough assets to fade into the night. Instead, retirement is a period of financial freedom, where you can afford to find fulfillment as desired."

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The old conventional wisdom that retirees should foreswear stocks for bonds is wisdom no more, says Stuart Ritter, senior financial planner for T. Rowe Price.
Ritter, retirees, shy, stocks
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2015-00-06
Monday, 06 July 2015 07:00 AM
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